Buy Gravita India; target of Rs 1,750: ICICI Securities

ICICI Securities is bullish on Gravita India has recommended buy rating on the stock with a target price of Rs 1,750 in its research report dated July 23, 2024.

Broker Research

July 25, 2024 / 20:47 IST

Buy

26 Aug, 2025 12:21

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ICICI Securitie's research report on Gravita India

The reported EBITDA of INR 877mn was 24% ahead of estimates. Beat was mainly due to outperformance in the aluminium segment and better-thanexpected volume growth in the lead segment. Key points: 1) Lead/plastic volumes grew 43.2%/16% YoY while aluminium volume declined 48.5% YoY. 2) EBITDA/te of lead/aluminium was INR 19,321/INR 19,414; improvement in EBITDA/te of Al is mainly on account of higher LME prices. 3) GRAV incurred capex of INR 150–200mn during Q1FY25, targeting INR 1.8bn (existing vertical of INR 1.4bn and new vertical of INR 400mn). 4 In Q1FY25, 40% of scrap sourcing was from domestic sources. 5) Lithium-ion recycling and tyre recycling projects at Mundra are likely to be operational in H1FY26. 6) Gross debt stood at INR 5.5bn and net debt at INR 4.7bn, as of Q1FY25-end. Management guides for volume growth of 25% for FY25 and sustainable EBITDA/kg of INR 14–16/kg in Al recycling and INR 18–19/kg in lead segment.

Outlook

Despite being in the commodities space, GRAV’s margins are likely to remain stable and relatively better compared to peers due to sourcing efficiencies and back-to-back hedging policy for lead. Going ahead, even aluminium recycling operations in domestic market (ADC-12 alloy) would be largely hedged, allowing further stability in margins. Going forward, we peg volume growth of 25% YoY and EBITDA/EPS growth of 38%/28% YoY till FY26E. Given the focus on a circular economy, relatively better margins compared to peers and high RoE, we raise our valuation multiple to 30x (earlier 21x) on FY26E EPS. We have also raised our EPS estimates by 5%/6% for FY25/FY26 owing to the lower (sustainable) depreciation at overseas subsidiaries. Our revised target price works out to INR 1,750 (earlier INR 1,150).

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